Yet in another sense, Soros and other investors are right to sound the alarm. China presents two risks that are more fundamental than the ones now catching the headlines. First, the global impact of its growth has contracted far more rapidly than the headline GDP numbers. Second, there are strong reasons to doubt that the government of Xi Jinping is really committed to crucial market-oriented reforms, because these would require an unacceptable dilution of Communist Party power. Until Xi steers a credible course in favor of markets, the world will endure more China scares. [Source]

At Newsweek, Elizabeth Economy writes about the politics behind what she calls Beijing’s “disjointed and seemingly sub-optimal economic decision-making process.” Like Kroeber, she argues that economic reforms have stalled because the Party, and in particular Xi Jinping, are unwilling to cede control over the economy in a way that market reforms would require. She writes:

Most analysts and businesspeople outside China believed that the Chinese government would roll right through its massive economic reform agenda broadly laid out in the November 2013 third plenum of the 18 th Party Congress. It wasn’t a question of “if” but “when.” That is not happening.

In addition, the Chinese people want their assets to be secure, their children to be well-educated, and their air to be clean. All of these are actually monumental reform agenda items. (Note: surely it cannot be chance that in 2012, Chinese nationals made up 1,675 of the ten thousand EB-5 visas—visas granted to people who invest one million dollars in a U.S. company and provide jobs for ten people—offered by the U.S .government and in 2014, they accounted for 8,308.)

At the same time, labor protests have just about doubled during 2014-2015 to 2,500. Social stability remains the leaders’ paramount concern, and could easily be a trigger for a round of poor economic choices.

None of this is to say that economic reform in China won’t happen. But it will reflect all the messy and painful politics that plague any country trying to overhaul its economy, and then some.[Source]

[..T]wo new studies from institutes in Beijing suggest that while Chinese people remain wedded, though not always blissfully, to the status quo, Mr. Xi confronts a persistent undercurrent of discontent with inequality in incomes, schooling opportunities and health care. That social strain could become troublesome, especially if the economy continues to falter.

“In the future, Chinese society will face a series of stern challenges,” said the China Family Panel Studies 2015 report, produced by the Institute of Social Science Survey at Peking University.

“At the same time that our nation’s total wealth has rapidly grown, there are increasingly pronounced imbalances in Chinese society,” it said. “This is reflected not only in the polarization of incomes and wealth, but also in plainly observable disparities in education, health and other social protections.”

Mr. Xi and his prime minister, Li Keqiang, have said that overcoming these social imbalances is a priority. But the report, drawing on the results of an annual survey covering more than 35,000 adults and 13,000 families, warns that more needs to be done. [Source]

The report didn’t issue a new Gini coefficient for household income for 2015, an index used to measure the distribution of wealth in an economy. Instead, its authors put forth an already broadly-held assessment that the gap is widening.

“In the last 30 years, income inequality in our country has become a rising trend, increasing from 0.3 in the 1980s to 0.45 or more in recent years,” the report said. A Gini coefficient of zero represents perfect equality, while one means perfect inequality.

China’s National Statistics Bureau said last year that the coefficient fell slightly to 0.469 in 2014 from 0.473 in 2013. It said the index hit a high of 0.491 in 2008 and has been ebbing since.

The government hasn’t published its index for 2015 yet, but its assertion of a decline might be at odds with the Peking University report of a widening gap. The university’s report said that the income coefficient for households in 2012 was 0.49, which would suggest there wasn’t much of a decline between 2008 and 2012. [Source]

The surprise announcement, which is bound to raise new questions about the accuracy of Beijing’s economic statistics, came just hours after Wang briefed reporters on the state of China’s economy.

China’s economic statistics have come under fire in recent years from analysts and economists who say they are artificially inflated. Some are convinced that China is outright cooking its books. Others debate the accuracy of certain data and point to more meaningful alternatives like electricity consumption or rail freight.

In the past, criticism of GDP calculations was mostly tied to “GDP worship.” One way for officials to get a promotion, be it at the village or provincial level, was to hit — or exceed — growth targets, and then send the good news along to Beijing.

“China does not have an independent statistics bureau,” Andy Xie, an independent economist, told CNN last year. “It depends on local governments reporting the numbers from the bottom up, and local governments do have an incentive to distort numbers.” [Source]

Many attempts to parse China’s growth rates take inspiration from the nation’s top economic official, Premier Li Keqiang, who as a provincial governor in Liaoning was quoted in a leaked U.S. diplomatic cable saying that China’s GDP numbers were “man-made” and therefore unreliable. Mr. Li recommended looking at three indices—electricity consumption, rail cargo volume, and the volume of loans disbursed – for a more accurate picture. This and subsequent variations became known as the “Keqiang I”

In December, state media said that “water injection” — a Chinese phrase for cooking the books – by local officials in the northeast rustbelt provinces of Liaoning, Heilongjiang, and Jilin – had distorted investment and growth figures for years, without providing details.

The National Statistics Bureau did not reply to a request for comment. In a news briefing last week after China’s 2015 growth figure was released, the agency’s head Wang Baoan told reporters that China’s economic data was “valid and reliable” and its methodology in line with “global standards.”
[Source]

Wang, 52, was appointed chief of the statistics bureau last April after serving 24 years in the Ministry of Finance.

Chinese anti-graft investigators can spend years assembling a case, suggesting accusations against Wang might stem from his previous post instead of his short tenure at the statistics agency.

Chinese regulators have wide discretion in making decisions that can affect billions of dollars in business.

The anti-graft committee reported this month some 282,000 officials were punished last year for rule violations. It said the anti-corruption crackdown would continue this year with “intensity and pace unchanged.” [Source]

[Wang] said that last year 200,000 party members received light punishment, while 82,000 faced severe punishment. In many cases the term “discipline violation” indicates a suspicion of corruption but can also refer to breaking other rules, from living extravagantly to exhibiting laziness on the job.

People’s Daily, the party’s mouthpiece publication, backed Mr. Wang’s pledge in a commentary on Monday that says sustaining the campaign is essential if China wants to develop. “A big tree will eventually wilt if it is exposed for insects to bite,” it said.

The newspaper also rejected any connection between the anti-corruption fight and China’s economic “self-adjustment” to a speed that is medium-to-high, instead of high. The commentary said anyone who can’t see how the anti-corruption fight is actually beneficial to the economy “can’t see the forest for the trees.” [Source]

First, here’s the picture by province. This chart shows that Guangdong has been China’s most strike-prone province over the past several years, but several other provinces have seen large increases in labor unrest in the past two years, including Henan, Hebei, Hubei, Shandong, Sichuan, and Jiangsu. Right now, I don’t have monthly or quarterly province-level data on population size and economic growth to model the relationship among these things, but a quick eyeballing of the chart from the FT in my last post indicates that these more strike-prone provinces skew toward the lower end of the range of recent GDP growth rates, as we would expect.

Now here’s the picture by industry. This chart makes clear that almost all of the surge in strike activity in the past year has come from two sectors: manufacturing and construction. Strikes in the manufacturing sector have been trending upward for a while, but the construction sector really got hit by a wave in just the past year that crested around the time of the Lunar New Year in early 2015. Other sectors also show signs of increased activity in recent months, though, including services, mining, and education, and the transportation sector routinely contributes a non-negligible slice of the national total.

[…] As CLB has reported, almost all of the strike activity in China is over pay, usually wage arrears. There’s been an uptick in strikes over layoffs in early 2015, but getting paid better, sooner, or at all for work performed is by far the chief concern of strikers in China, according to these data. [Source]

“It was really surreal to hear the mayor of China’s wealthiest city start a speech off by saying, ‘We’re not too concerned about GDP,’” [China correspondent Rob] Schmitz says. “For the past couple of decades GDP growth has been the be-all, end-all obsession for China’s government.”

According to Schmitz, there’s much more to the health of the Chinese economy than just GDP numbers. Chinese officials were so eager to boost GDP that they didn’t care how the numbers were achieved. “Up until now, a lot of government spending has been inefficient and wasteful, only benefiting the rich and the powerful,” Schmitz says. [Source]

China’s General Administration of Sport said the desire for gold medals has led to “a small number of athletes and coaches who will stop at nothing to achieve good results in competitions”.

“The unscrupulous, illegal and fraudulent pursuit of gold medals not only distorts the spirit of sport, but also hurts career development and national interests, the agency said in a statement issued on Monday.

“It undermines the image of sport and is contrary to its value. We must resolutely oppose this and effectively eliminate it,” it said.

[…] China will scrap awards to provinces whose athletes win Olympic and Asian Games gold medals, as well as the ranking of provinces and cities by golds won at National Games that are held every four years, the agency said. [Source]

“Usually, certain targets or certain instructions are issued at the top level,” Joshua Rosenzweig, a researcher in Hong Kong who studies China’s criminal legal system, said by telephone. “And as they work their way down the hierarchy, they sometimes get more and more concrete, because everyone is expected to satisfy the desires of their superiors.”

[…] The targets were just one measured by the Chinese legal system to ensure that official statistics show a nearly unblemished record, said Shang Baojun, a criminal lawyer in Beijing. One consequence is that the police are often reluctant to record less serious crimes unless they are sure of arresting someone, said Mr. Shang, who welcomed the proposed changes.

“The very existence of these targets is irrational,” he said by telephone. “If there’s a murder, and if you absolutely have to solve the case or the public security bureau chief or detective will lose his post or be demoted, then actually that’s the root of many cases of confession under torture that have emerged.”

[…] Lawyers and experts said that abolishing the official targets could make it easier for the Chinese police, prosecutors and courts to withstand demands to deliver swift convictions, but they would remain under pressure from official expectations. [Source]

Autocratic regimes can oppress their citizens without performance targets, and performance targets are not necessarily a bad idea. Many well-run companies and governments put them to good use. But the combination of autocracy and targets is a dangerous one because officials are likely to place hitting their numbers above other considerations, such as adherence to the law and human decency.

[…] Tweaking the rules will not solve the problem, which goes to the heart of the Chinese system. The government does not have a methodology for getting officials to run their patches in a way which is effective, legal and commands the consent of the people. Targets can increase government’s effectiveness, but they do so at the cost of legality and popularity.

The only way of combining the three is to make officials accountable to the people, through elections. This would not be as radical a move as it sounds. The constitution, whose importance Mr Xi has extolled, entitles people to vote freely for local legislators, who have the theoretical power to dismiss officials. In practice only Communist Party stooges are allowed to stand. But if Mr Xi really wants officials to stop abusing citizens, he should introduce a system that makes them genuinely accountable. That would be a better way of discouraging protests than issuing targets to suppress them. [Source]

UNTIL 1890 China was the world’s largest economy, before America surpassed it. By the end of 2014 China is on track to reclaim its crown. Comparing economic output is tricky: exchange rates get in the way. Simply converting GDP from renminbi to dollars at market rates may not reflect the true cost of living. Bread and beer may be cheaper in one country than another, for example. To account for these differences, economists make adjustments based on a comparable basket of goods and services across the globe, so-called purchasing-power parity (PPP). New data released on April 30th from the International Comparison Programme, a part of the UN, calculated the cost of living in 199 countries in 2011. On this basis, China’s PPP exchange rate is now higher than economists had previously estimated using data from the previous survey in 2005: a whopping 20% higher. So China, which had been forecast to overtake America in 2019 by the IMF, will be crowned the world’s pre-eminent country by the end of this year according to The Economist’s calculations. The American Century ends, and the Pacific Century begins. [Source]

At the Wall Street Journal, Tom Wright describes the PPP-based methodology in detail, explaining that while it’s used by economists to “get at the hidden advantages developing nations have,” it comes with many limitations:

PPP is useful as a way to get at hidden advantages developing nations have. For instance, it costs the Chinese government much less to pay its soldiers than it does the U.S. government to pay GIs. Tourists from rich countries intuitively reflect on PPP when they visit poor ones and buy dinner, thinking, “Geez, my dollar goes farther here.”

[…] But the concept has steep limitations too. China can’t buy missiles and ships and Iphones and German cars in PPP currency. They have to pay at prevailing exchange rates. That’s why exchange rate valuations are seen as more important when comparing the power of nations.

Like all data, though, there are reasons to treat PPP-based calculations with caution. For one, they are a statistical construction, based on complex surveys of baskets of goods in many countries. The IMF points out here the possible statistical errors. And the ICP notes in Wednesday’s release there’s a margin of error either way of 15% when using its data to compare economies of different sizes.

[…] Ranking the ICP numbers on a per capita basis, China comes in 99th position. India is at No. 127. The U.S. places 12th, a reflection of its much higher productivity and relative wealth. [Source]

Prime Minister Li Keqiang announced last week at the opening of the annual session of China’s National People’s Congress that the country’s goal for growth was “around’’ 7.5 percent this year, the same as last year but lower than past targets of 8 percent annual growth. But he did not guarantee that number, saying it would take “arduous efforts” to meet it, and blaming China’s past growth-at-any-cost model of “inefficient and blind development” for the country’s heavy air pollution.

[…] “While it’s clear this government wants to deliver meaningful reforms, whether we get a ‘reform dividend’ in 2014 is an open question,’’ Mr. Green said in an email. “In contrast, slowing credit growth is going to drag, and the domestic housing market recovery appears to be easing. So it will be tough to hit 7.5% in reality, I think.’’

Mr. Song’s analysis rings of a mindset that Mr. Li has said he is committed to ending: the push for growth above all else that has helped stoke local debts, wasteful spending and heavy smog. For years, officials at all levels of government followed the mantra “protect the eight” (bao ba), which meant doing what it took to make sure the government met its 8 percent growth target. That was the minimum level seen as necessary to create enough jobs for the tens of millions of people migrating from the countryside to the cities and to keep social unrest in check. [Source]

China is at a “crossroads” in its economic development, Mei said on Thursday, where quantity of growth is overemphasized compared to quality of growth. Of the major drivers of economic development, China is exhausting labor input and investment, which is a model that “can’t go on forever.”

In contrast to the US, whose growth is sustained by more efficient use of resources, there is a limit to how much longer China can rely on labor and investment, he said.

“You can see that there are a lot of indications that China has negative resource efficiency, because China right now is using 45 percent of the world’s resources, but only produces 12 percent of the world’s GDP,” Mei explained.

[…] “For the last 30 years, China has been eating up a lot of capital, but it never seriously goes to the restroom. So one of the most amazing characteristic is the US system was the financial crisis. It’s bad, but it’s like somebody going to the restroom. You take a break and get rid of the excesses, then you become healthy. China hasn’t had a chance to do that,” he said. [Source]

Premier Li Keqiang today signaled that China will push ahead with key fiscal and financial reforms that should eventually allow the country to cut its dependence on the fixed asset investment that currently drives economic growth and has inflated a damaging property market bubble.

[…] The government plans to maintain the GDP growth target at “about 7.5 per cent”, after some economists predicted that a lower target might be put in place to underscore a decisive shift in the growth model toward slower, yet greener and more sustainable development over the next decade.

[…] Li Keqiang himself doesn’t believe in the accuracy of Chinese GDP statistics.

That, at least, is what he told then-U.S. ambassador to China Clark Randt over dinner on Mar. 12, 2007. At the time, Li was the Secretary General of Liaoning Province, and widely viewed as a potential successor to Chinese President Hu Jintao. According to a Mar. 15, 2007, declassified U.S. diplomatic cable (released by Wikileaks) recounting the dinner, a “smiling” Li declared that Chinese GDP figures were “man-made” and therefore unreliable — “for reference only.”

Of course, only the most naïve economist would believe that a country as large and unruly as modern China could produce accurate GDP figures. Li told Randt that he preferred three different measures for evaluating his province’s economy, all of which were harder to fudge: electricity consumption, volume of rail cargo, and loan disbursements. “By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth,” the cable reported. Not long after the cable was released, the Economist — in tribute to Li’s candor — created the Keqiang Index, revealing a far more volatile Chinese economy than official GDP numbers suggested.

[…E]ven China’s state-owned media is now referring to “GDP worship” as a national economic religion with increasingly negative consequences[…] [Source]

It is all right for China to slightly miss the government’s 7.5 percent economic growth target this year as long as enough jobs are created, the finance minister said on Thursday, stressing that a healthy labour market is more important.

Lou Jiwei told a briefing at China’s annual parliament meeting that the government has three broad economic policy goals each year: create jobs, control inflation and boost the economy. He said jobs are the most important of the three.

“Let’s say for instance, this year’s economic growth is not 7.5 percent, but 7.3 percent or 7.2 percent. Does this count as around 7.5 percent? Yes, it counts,” said Lou, who was previously the chairman of China’s sovereign wealth fund, China Investment Corp..

“Whether GDP growth is to the left or to the right of 7.5 percent, that is not very important. What is important is job creation.”

Premier Li sets himself a mission impossible… The new government promises to speed up reform, manage debt risks, fight pollution, and yet maintain 7.5% economic growth all at the same time. This is going to be nothing if not challenging. Maybe mindful of a potential miss, policymakers seem to give themselves a small degree of flexibility by using new phrases like “a reasonable range for the growth rate” and “the growth target is flexible…” The Chinese government really needs a lot more flexibility this year… It seems to us a mission impossible to achieve each and every task outlined in the premier’s speech without compromising on the growth target.– Wei Yao, Société Générale

This target will generate expectations of more policy support if the economy slows much further. While some reformers argued for a target of 7.0% or a range of 7.0%-7.5%, the ultimate decision appears to have been that Beijing cannot reform without a certain level of growth. The 7.5% target sends a strong signal to the provinces that while the central government is pushing for some painful reforms, it will still guarantee a certain level of growth. – Wei Li And Stephen Green, Standard Chartered Bank

[…] The government has left the growth target unchanged at “about 7.5%” for 2014, in line with most expectations. At the same time, though, Premier Li reiterated the need to control local government debt risks, increase oversight of shadow banking and suggested that fixed asset investment should slow… At face value, these goals appear incompatible. With consumer spending growth stable over recent years and exports on course only for a moderate acceleration, any appreciable slowdown in credit and investment would be almost certain to pull growth below 7.5%… Unlike in the past, it no longer appears that policymakers are inclined to defend the target at all costs. – Mark Williams and Julian Evans Pritchard, Capital Economics […] [Source]

Unfortunately, however, there are major reasons to doubt this upbeat assessment. Not only is the urban unemployment rate of 4.1 percent highly questionable, having remained suspiciously constant for many years, but there is also growing cause for concern that the Chinese economy will not be able to continue to create employment as it has done in the past.

Indeed it appears there are a number of factors, both home-grown and international, that risk coming together in the next few years to cause significant unemployment in China. Most worrying for China’s leaders is the fact that the blueprint to restructure the country’s economy, unveiled at last year’s Communist Party Third Plenum, may well exacerbate this risk.

Given that rapid employment growth and its effect of lifting wages and increasing living standards underpins the legitimacy of the entire Chinese political and economic model, the consequences could be extremely serious. [Source]

]]>169011Economy Posts 7.7% Growth Rate in 2013http://chinadigitaltimes.net/2014/01/economy-posts-7-7-growth-rate-2013/
Tue, 21 Jan 2014 01:41:37 +0000http://chinadigitaltimes.net/?p=167940China’s economy grew by 7.7 percent for both the fourth quarter and the full year, narrowly missing estimates of a 14-year low growth rate. From Joe McDonald at the Associated Press:

Those figures appeared to mask a much sharper deterioration during the three months ending in December. Factory output, exports and investment all weakened. On a quarter-to-quarter basis, economic growth dropped to 1.8 percent from the previous period’s 2.2 percent.

“The economy is slowing quite rapidly. The slowdown has accelerated during the quarter,” said economist Dariusz Kowalczyk of Credit Agricole CIB.

That weakness might force Beijing to resort to state-led investment to support an expansion. That would boost debt levels that already have prompted unease about the health of China’s financial system and could hamper efforts to shift to more self-sustaining growth based on domestic consumption. [Source]

Much of the rationale behind Beijing tolerating sub-8% GDP growth is that in so doing, it could start to steer the economy away from reliance on heavy investment and toward a more consumption-driven economy. But such a rebalancing will be difficult if consumer incomes aren’t rising fast enough.

It is possible the drop in disposable income growth—to 7% from 9.6% in 2012—is a blip. Some of it could be survey respondents unwilling to report unofficial “gray” income given the government’s crackdown on conspicuous consumption and ill-gotten gains.

If the slide continues, however, difficulties could be in store for companies betting on the rise of the Chinese consumer. […] [Source]

The triple combination of faster real economic growth, faster inflation and an appreciating currency explain how China’s economy more than quintupled in dollar terms from 2003 to 2013, to $9.2 trillion last year — still a little more than half the size of the American economy, but catching up fast.

There are many signs that China’s tempo is flagging. Nominal economic growth has nose-dived in China from a peak of 22 percent in 2007 to almost 18 percent in 2010 and 2011 to a little less than 10 percent in each of the past two years. [Source]

In order to make sure this year’s growth comes in anywhere close to 2013 target, the government will need to roll out a new stimulus and keep credit growth booming. That encourages businesses to pile on more debt—which is really dangerous for a country that’s already shelling out 39% of its GDP to pay off interest on existing debts.

Because of the distortions created by stimulus spending, many economists believe China’s investment is increasingly flowing into projects—or even worse, into real estate—that aren’t profitable. The cost of creating overcapacity is slower growth in the future. The government might not allow a much lower rate of GDP growth in 2014 (we’ll have to wait until the government holds its big annual meeting in March to find out what this year’s target is). But it has to happen eventually—and the sooner, the better. [Source]

People in the United States and the United Kingdom overestimate the quality of economic data. Even if people are above board, it is simply hard to estimate something like the American economy.

With China, you would have even more difficulty. I think the general lesson is that by looking at a broader consensus of indicators, you do well than just looking at one indicator or one sector.

It is problematic to think about “how do you measure Chinese growth”. One way [is to look at] more public facing measures – by looking, for example, at the amount of light output emanating from China. [Source]

China has one big advantage over neighbors like South Korea and Indonesia that were laid low by the Asian Financial Crisis in 1997 – almost none of that debt is denominated to foreign currency, or owed to foreigners. That means a Greek-style public debt crisis is hard to imagine, according to Andrew Batson of Dragonomics, a Beijing-based research firm. Instead, the risk is that the government will be tempted either to allow higher inflation to eat away at the value of its debt, or else to keep the financial system highly regulated and prop up weak borrowers indefinitely – pushing down efficiency across the economy and leading towards stagnation.

At 60%, Dragonomics’ estimate for total public debt is in the middle of the pack.

Apart from 8 trillion yuan of sovereign bonds, there could be almost 20 trillion yuan of local government debt out there, according to Standard Chartered’s numbers. Most of China’s provinces, cities and counties are technically not allowed to borrow, but in the two years after Lehman Brothers the central government turned a blind eye as they set up investment vehicles to take out loans on their behalf, mostly to pay for an epic infrastructure splurge. That kept China motoring on through the crisis, but it also left city halls staring at a hefty bill.

The last NAO audit found 10.7 trillion of local government debt as of the end of 2010, and analysts expect a significant jump this time around. [Source]

According to economists at the bank, China’s local government debt, which is estimated to be around 15-16 trillion renminbi (RMB) ($2.5-2.6 trillion) as of the end of 2012, still stands at a very low debt-to-GDP ratio of 30 percent.

When combined with the central government debt, China’s total debt still measures 50 percent of GDP, which BoFA describes as a relatively healthy position compared to other highly leveraged economies like the U.S. and Japan, which have debt to GDP ratios of around 100 percent and 175 percent, respectively.

In addition, its central bank’s cash savings, equivalent to 6 percent of GDP, places the central bank in strong position to weather any shocks, said the bank. [Source]

]]>160796Second Quarter GDP Slows to 7.5%http://chinadigitaltimes.net/2013/07/poll-of-economists-predict-china-slowdown/
Mon, 15 Jul 2013 03:20:37 +0000http://chinadigitaltimes.net/?p=159607Early Monday, Xinhua reported that the GDP for the second quarter had slowed to 7.5%, as many economists had expected:

A Reuters poll of forecasts by economists projected China’s economy grew 7.5 percent in the April-June quarter from a year earlier, slowing from 7.7 percent in January-March.

However, trade figures last week showing an unexpected fall in exports for the first time in 17 months raised market concerns GDP could be weaker than expected.

New Premier Li Keqiang has been prominent in pushing for economic reform over fast-line growth, suggesting the government is in no rush to offer fresh stimulus to revive an economy in a protracted slowdown. Before Monday’s figures, growth had already slowed in eight of the last nine quarters.[Source]

Financial markets may have underestimated the leadership’s tolerance for slower growth as it pushes to wean the economy off a reliance on exports and investment with reforms and deregulation to encourage more consumption, analysts say.

“The focus is still on reforms,” said Xu Hongcai, senior economist at the China Centre for International Economic Exchanges (CCIEE), a well-connected think-tank in Beijing.

“The chances of a cut in interest rates or banks’ reserve ratio look slim,” Xu said. “Previously, when the economy was not good, local officials held out their hands for money from the central government. But now they have to embrace reforms as no money will be given.[Source]

The Communist Party of China (CPC) should adopt more comprehensive criteria for assessing the performance of its officials, said Xi, also general secretary of the CPC Central Committee, at a meeting on the work of personnel resources on the eve of the 92nd founding anniversary of the Communist Party of China (CPC).

It should consider a local official’s work in various aspects including people’s livelihood, the development of local society and the quality of environment.

“We should never judge a cadre simply by the growth of gross domestic product (GDP),” he said.

“Xi is further legitimizing the case for slower growth,” said Andy Mantel, chief executive officer of Pacific Sun Advisors, an asset manager in Hong Kong that invests in Chinese stocks. “It is important to let local government officials know there is less importance of non-stop economic growth. There will be less pressure for local government officials to pump up their economic growth forecasts.” [Source]

The new rules are encouraging, according to one environmentalist who spoke to CBC News, though he questioned how effectively local governments could enforce them:

Environmental campaigner Ma Jun said the measures show the central government is continuing to pay great attention to air pollution, “one of the major concerns of the public.”

However, local governments pose a potential obstacle because they understand that their performance is judged by growth, said Ma, director of the Institute of Public and Environmental Affairs. “When it comes to the approval of new projects, the local governments often still pursue the highly energy- and pollution-intensive projects which can often generate higher GDP growth rate in the short term,” he said.

One measure says heavily polluting industries and companies will be required to publicize information about how their operations affect the environment. When such information is disclosed to the public, it will be harder for local governments to interfere, Ma said.

“This will be subject to public supervision. This is new and I think this is very important,” he said. [Source]

Evidence has mounted in recent weeks that China’s economic growth is fast losing momentum but Premier Li Keqiang tried to strike a reassuring note, saying the economy was generally stable and that growth was within a “relatively high and reasonable range”.

China’s economy grew at its slowest pace for 13 years in 2012 and so far this year economic data has surprised on the downside, bringing warnings from some analysts that the country could miss its growth target of 7.5 percent for this year.

“Growth remains unconvincing and the momentum seems to have lost pace in May,” Louis Kuijs, an economist at RBS, said in a note. “The short-term growth outlook remains subject to risks and we may well end up revising down our growth forecast for 2013 further.” [Source]

“The May data will force China’s leadership and the central bank to rethink growth and inflation — it seems they were too optimistic about growth and too concerned about inflation,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “It’s a test for China’s leadership to see whether they are determined to reform.” [Source]